Question

On April 1, a patent with an estimated useful economic life of 12 years was acquired for $100,800. In addition, on December 31, it was estimated that goodwill of $43,500 was impaired. Journalize the adjusting entry on December 31 for the amortization of the patent rights. Do not round intermediate calculations. If an amount box does not require an entry, leave it blank.

Answer 1

On December 31, journalize the adjusting entry for the patent's annual amortization. Debit Amortization Expense - Patent $8,400 and credit Accumulated Amortization - Patent $8,400.

To journalize the adjusting entry on December 31 for the amortization of the patent rights, we need to calculate the annual amortization expense.

The formula for amortization expense is:

`\[ \text{Amortization Expense} = \frac{\text{Cost of Patent}}{\text{Useful Life}} \]`

Substitute the given values:

`\[ \text{Amortization Expense} = (100,800)/(12) \]`

Now calculate the amortization expense:

`\[ \text{Amortization Expense} = 8,400 \]`

The adjusting entry will decrease the value of the patent by the annual amortization expense:

`\[ \text{December 31} \]\[ \text{Amortization Expense} \quad 8,400 \]\[ \text{Accumulated Amortization - Patent} \quad 8,400 \]`

This entry reflects the recognition of the annual amortization expense for the patent on December 31.